Quotes from Companies Bill debate in Rajya Sabha

UPDATE: on 30th August 2013:Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

For every new law, legislative intent, which show it in debates taken place in Parliament, become important. These debates offer a guide while drafting subordinate legislation. There are many questions about future rules and regulations. I, here, compiled some important quotes from this debates from Rajya Sabha.[i][ii][iii]

SHRI MANI SHANKAR AIYAR

It turned out that while unleashing capitalism upon this country, there was also the danger of unleashing crony capitalism.

But don’t forget, there were two different Governments in power at the time of the Harshad Mehta scam and at the time of the Ketan Parikh scam.

I discovered that what Marx was saying was that classes that become dominant in the economy, attempt to become dominant in the polity. In other words, if the State vacates the commanding heights, then oligopolists and monopolists will try and seize those commanding heights.

The mere fact of setting up a regulatory authority does not ensure that we actually have an effective regulatory authority.

In fact, that those who constitute under 0.2 per cent of the population of this country are able to control at least 20 per cent of the assets of this country.

The shocking fact which has come up is that it can’t trace 56 per cent of national income to the point of origin. This is partly because the poor of India have learnt that if they confess to be above the poverty-line, then they will be denied various benefit schemes. Perhaps, 50 per cent of this 56 per cent is the result of underreporting by the rich of India.

I fear that some of them might be using the CSR to put up pandaals for their daughters’ weddings.

Finally, Sir, about auditing, the two JPC Reports have clearly established that the Institute of Chartered Accountants of India of which, my father, who was a Chartered Accountant, was one of the founders, and, therefore, I have a right to speak about my own inheritance, have not proved that they are absolutely capable on their own of ensuring effective and honest audit.

Because had the auditors done their job properly in the Harshad Mehta or the Ketan Parikh case, then, long before this would have become public information, it would have come to the knowledge of the Government, to the knowledge of the public, and the terrible losses suffered by individuals or investors would not have taken place.

It is absolutely essential that the Regulatory Authority assures itself that a company is being set up with a business purpose in mind and not with tax evasion purposes.

SHRI V.P. SINGH. BADNORE

Because, from 300 pages, from 470 clauses, the sub-sections and the rules, which are going to be framed, can become so complicated and may not have the clarity that one seeks for and it would be in the ambit of ambiguity. And, that is what I am really worried about.

We also live in the times of terrorism, money laundering and if this one person runs away, how are you going to trace him? What is the liability that he is going to hold? So, we need more checking before a one-person company comes in existence.

The auditor’s responsibility and penalties on him is another issue. There should be a limited liability. There can be frauds but not necessarily by the CA.

Ten per cent of the super rich in our country control 53 per cent of the assets of the nation. Ten per cent of the poorest of the country control only .2 per cent of the assets of the nation.

Crony capitalism is not a new way. It is connected with the classical capitalism. But in India, crony includes political leadership, bureaucracy, corporate and some sections of the media as clearly reflected at the time of Spectrum scam in our country.

Having Independent Directors is good. But there should be, at least, one Director, either elected or nominated, from amongst employees.

I also must mention that when I was the Director of Reserve Bank of India, a Ganguly Committee was formed for corporate governance in the banking sector. The recommendations of the Committee were accepted and implemented in the private sector banks, but the Government of India has yet to have a code of corporate governance in the State sector of the bank.

SHRI N.K. SINGH

The Minister might like to consider and clarify the tax treatment to CSR spending by companies whether it is to be treated as non-deductible income, since it is an allocation of profit, or, whether it is to be treated as an allowable expenditure under the Income-tax Act.

इन्होने 141(1) में प्रोवाइड किया है, Firms where majority partners are Chartered Accountants can be auditors. Again, it is a very dangerous provision, Sir. You can have foreign companies; you can have companies where majority, either in number or percentage, will be held by non-Chartered Accountants becoming auditors. So, this is a backdoor entry to foreign companies. I think, they should either specify what they mean by majority. Is it by the percentage of ownership, economic interest, shareholding or number of partners? How do they decide majority? और क्या यह प्रावधान अच्छा है, जिसमें non-Chartered Accountants partners वाली फर्म भी ऑडिटर बन सकती है।

SHRI SACHIN PILOT

I am with one of those people who believe that we rather have fewer regulations but 100 per cent compliance. There is no point in having 1,000 regulations and companies are meeting only half of them.

The blue chip companies are always there for large turnovers, but whether it is Japan, Germany or US, the small and medium enterprise companies deserve and need a lot of our attention.

A simple artisan or a craftsman working in any part of our country should be able to avail the benefits of having an incorporation without having the complexities of a lot of disclosures and orders and reporting that large companies do.

The freedom to choose the area of work should be with the company, but there must be enough disclosures so that the world at large, shareholders, and all of us, know that the good work the companies are doing is reported on the companies’ websites and on our own website.

We do not want to create an Inspector Raj. We don’t want to have ‘No Objection Certificates’ from the Government.

ESOPS are employee stock option plans. Now, Independent Directors are not employees. So, I don’t know how we can treat Independent Directors as employees and allow them to have stock options.

Piyush Goyalji is known to be one of the brightest Chartered Accountants in Mumbai, but I think over time he has become a better parliamentarian. So, his job between being an accountant and a parliamentarian is a tough one to decide. But he has done a good job in batting for the profession of Chartered Accountants.

There is a provision for employees and workmen to have an Employee Welfare Trust wherein the employees, through the Trust, will be able to buy shares of companies and become owners of companies in some shape or form.

Writer of this blog, Aishwarya Mohan Gahrana is Practicing Company Secretary and Insolvency Professional working with M/s Aishwarya M Gahrana & Associates, a New Delhi based peer reviewed firm of company secretaries having pan India presence through friends and associates. This blog is a knowledge sharing initiative. Views expressed here is of writer; not of the organization(s) he is working with.